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How will theatre tax relief work?

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Neil Adleman and Matthew Parritt from entertainment law firm Harbottle & Lewis explain:

“In today’s Budget, the Chancellor has announced further details of the proposed new theatre tax relief which was initially mentioned in his December 2013 Autumn Statement.

As anticipated, the relief will follow the basic model of the existing film tax relief. There will be a lower rate of relief of 20% available for all theatre production and a higher rate of 25% for touring productions. Relief will be available on a per production basis and will extend to cover a range of live performance art forms including plays, musicals, opera, ballet and dance.

In general terms, the film tax relief operates on the basis of a “payable tax credit”, which means that the producer of a qualifying production receives a cash payment from the Government based on their level of eligible spend. The theatre tax relief is therefore likely to provide a valuable additional source of finance for theatre production. It may also create a need for producers to revisit how they structure the financing of theatre productions, in order to be able to make the most of the opportunities afforded by the tax credit. In addition, the tax credit should be of significance to the subsidised sector as it should be possible to structure production arrangements which enable subsidised sector producers to benefit as well.

The Budget announcement indicated that HM Treasury would shortly begin consultation on implementation of the relief with a view to it being legislated for in the 2014 Finance Bill and introduced with effect from September 2014.

The progress which has been made on the relief in the short period of time since the announcement in the Autumn Statement is encouraging and demonstrates the Government’s commitment to its introduction later this year.

At this point in time the relief looks to have the potential to provide a major step change in the financing of theatre production both in the West End and beyond and in the commercial and subsidised sectors.”

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